Link: Case Summary Document
Citation:  ONSC 3386
Acknowledgement:The Pemsel Case Foundation thanks The Australian Centre for Philanthropy and Nonprofit Studies for its contribution in the drafting of this Case Note.
This Canadian case raised the issue of the extent of a donor’s right of input into the direction taken by a health and research centre that is the beneficiary of donated funds. Is a donor like an investor in a business who can require detailed reports, financial transparency, and to be consulted on the implementation of a funded program?
The Faas Foundation (FF) is a philanthropic organisation directed by its principal, Andrew Faas. The Centre for Addiction and Mental Health (CAMH) is the largest mental health and addiction teaching hospital in Canada. It is also a world-class research centre in those matters. The hospital combines a number of related endeavours, including clinical care, education, health policy, research, and health promotion, all aimed at patients and members of the public affected by mental illness and addiction.
In 2014, Faas signed a Donor Investment Agreement (DIA) to donate $1 million to CAMH toward the creation of ‘[email protected]’, a workplace mental health program. [email protected] was to be developed over a 3-year period, with Faas’ donation being paid in three equal instalments. In January 2015, Faas paid the first of the three instalments, but the other two instalments were never paid.
Faas was not satisfied with the direction of the program, and in May 2016 asked for the first instalment to be repaid. This was not done as the money had already been spent by CAMH. Faas subsequently made this application under section 6 of the Charities Accounting Act, RSO 1990, c. C.10 (the Act), which gives the court discretion to issue an order directing the Public Guardian and Trustee (PGT) to initiate an investigation into how a charity that has received a donation has used the funds donated to it.
Faas sought an investigation by the PGT into the financial management of the gifted funds by CAMH. The threshold definition raised by section 6(3) of the Act is whether the public interest would be served by an investigation by the PGT into the manner in which CAMH dealt with and disposed of the instalment payment that Faas made in January 2015. Although the application before the court was a general one, there were several issues underlying it:
a) whether CAMH should have adopted Mr. Faas’ particular view of the Mental Health Commission of Canada’s National Standard for Psychological Health & Safety in the Workplace (the National Standard);
(b) whether the [email protected] program should have been integrated into a collaborative program with Mental Health America (MHA) and the Yale Centre for Emotional Intelligence, both of which institutions had received donations from Faas;
(c) whether the timeline for the program is unduly short (3 years instead of Mr. Faas’ desired 5 years); and
(d) whether Faas was entitled to disclosure of CAMH employee salaries and other internal accounting matters that CAMH considers confidential.
On 27 June 2014, CAMH presented Andrew Faas with a written proposal for the [email protected] program (the Proposal). The idea of [email protected] was to ‘empower workers and help employers create psychologically safe and healthy environments’ in conjunction with CAMH’s implementation of the National Standard.
The Proposal contained a schedule of objectives for each of the three years of the Faas donation program. The schedule provided that during the first year (2015) CAMH would put together a team composed of its professional staff that would do the necessary background work. The priorities for the first year were particularized as including: (a) recruitment of essential personnel; (b) consultation with stakeholders with respect to the design and content of the program; (c) developing a method for evaluating the program; (d) creating preliminary design and structure for CAMH’s online portal, Portico; (e) carrying out a needs assessment to identify information or materials to be acquired for the program; and (f) formulating a strategy for the development of teaching materials and resources. The launch of the online resources and other aspects of the [email protected] program, and the implementation of leadership presentations and hands-on training sessions, were specified in the Proposal as taking place in the second and third years of the program.
Thus the Proposal made it clear that the major expense for the first year would be the staff salaries necessary for developing the groundwork of the program so that it could be put into effect during the following two years. Having accepted the Proposal, Faas entered into a DIA with CAMH which provided that the $1 million donation would be directed toward the design and implementation of the [email protected] program. The four main program elements, which were also set out in the Proposal, were described in the DIA as containing a number of more detailed items, including: (a) an online resource connecting workers, employers and policy-makers with up-to-date information on mental health in the workplace; (b) so-called ‘transformational leadership’, or educational presentations at the senior level dealing with workplace mental health strategies; (c) simulation-based training programs conducted on site at the workplace aimed at gaining the skills required for resolving mental health issues as they arise; and (d) continuous evaluation of strategies and content in an effort to strengthen the outcome of the program.
Mr Faas’ involvement in the program was intended to be very limited, in line with CAMH’s usual practice. The DIA did not give him any right of access to CAMH’s internal information or work product, any right of oversight of the program, or any involvement in designing or putting the program into action. The DIA did provide for CAMH to report to him on an annual basis. As to the content of CAMH’s reporting to Faas, the DIA stated:
(a) CAMH Foundation is committed to accurate, transparent and meaningful reporting to donors on the impact of the investments entrusted to us. At minimum, CAMH Foundation will report annually in writing on progress of the [email protected] program;
(b) management of donated funds and related disbursements will adhere to CAMH Foundation’s policies related to giving, disbursements and investments and as approved by the CAMH Foundation Board of Directors.
Formal reports were given to Faas in December 2015, and in May 2016. Shorter updates were provided in March and May 2016. This reporting was in addition to informal contacts by email, telephone and in person through 2015. The objectives of the first year appeared from the formal reports to have been met in all respects, and the presentations of 2016 indicated that the program was well-placed to meet all the objectives of its remaining two years of work.
Faas’ complaints began at the end of 2015 and concerned the general direction of the program. The court considered the specific issues raised by Faas in order to distinguish the public interest in ensuring that a charitable gift is managed appropriately from the donor’s private interest in seeing their own desires carried out. The court concluded that the issues were really not about financial management of the donation, but rather about Faas’ personal vision not being carried out. The Act was not invoked in such circumstances (at -):
Faas’ Application falls into the very category that the cases have excluded from the PGT’s jurisdiction. The complaint does not assert that CAMH has failed to use the Faas donation for CAMH’s own charitable objects. Instead, it questions whether the donation has been used in a way that conforms with Mr. Faas’ personal vision of the funded program. That is a quintessential private interest, not a public one. Compliance with the National Standard, cooperation with U.S.-based recipients of Faas donations, the shorter or longer timeframe of the [email protected] program, etc. do not raise any question as to whether the charitable objects of CAMH are being pursued. As for Faas’ desire for an accounting in order to ensure that the funds have been properly spent, the Application is based on conjecture. No actual mischief has been identified, and no misuse of funds is apparent from the record. According to all of the relevant CAMH reports, the preparatory work was accomplished during the first year of the [email protected] program; the major expenses involved in those preparations were the salaries of the CAMH staff dedicated to the program. Absent evidence of financial misdeeds, Faas has no particular right to a detailed accounting of CAMH’s program and its use of funds. Counsel for Faas argues that he does not know if there was mismanagement as it is not apparent what CAMH did with the first instalment of funds. He contends that Faas needs to invoke the PGT’s authority to investigate in order to get to the bottom of a question to which Faas is incapable of obtaining the answer. The problem, however, is that the first instalment was, and was always intended to be, dedicated to preparatory work. Since the preparatory work was done in the first year, but the funding was prematurely cancelled in the second year, the implementation that was to follow all of that preparatory work never took place. Only the invisible part of the program had the chance to be accomplished. It is the non-payment of the second and third instalments that prevented the fruits of CAMH’s initial year’s labour from being visible.
Therefore, there were no grounds on which to order an investigation by the PGT. There was no evidence of mismanagement of funds by CAMH. Since the court held that ‘such an investigation would be costly, disruptive to an important health care institution, and would serve no identifiable public interest’, the application was dismissed, with costs.
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Implications of this case
This case has been appealed to the Ontario Court of Appeal. The appellant (Faas) will ask the Court of Appeal to find that there is a public interest in donors having the ability to get the Public Guardian and Trustee to investigate and publicly report findings. This potentially raises the question of whether regulatory treatment of institutional charities in Canada should be the same as that for more modest organisations.